U.S. equities and dollar rise, as a consequence of fiscal tax stimulus hopes and Janet Yellen’s hawkish comments

Sep 28 • Morning Roll Call • 1614 Views • Comments Off on U.S. equities and dollar rise, as a consequence of fiscal tax stimulus hopes and Janet Yellen’s hawkish comments

Trump’s election tax pledge was back on the agenda on Wednesday, this potential reduction of tax, to a suggested 20%, from the current rate of circa 35%, was part of the reason U.S. equities rose sharply during the day. That planned and promised reduction is also the key reason equities have risen since Trump’s inauguration, they’ve not increased because of corporate performance, or earnings. If the Republican tax policy fails to become law, a severe equities’ correction may ensue. However, the belief on Wall Street is that; whilst a complex reductive tax policy may prove tricky and time consuming to roll out, a one off tax cut could be implemented immediately. And such a tax cut stimulus, in order to underpin equity prices, may accompany any move the Fed makes in relation to quantitative tightening, or interest rate rises, thereby cancelling out any negative impact of the rate rises.

U.S. DOLLAR

The Dollar index, a measure of the U.S. dollar’s worth, versus a weighting of six of its major peers, was up circa 0.54% on Wednesday at 93.47, after rising to 93.60, the highest level witnessed since August 23rd. Investors pushed up the value of the dollar after the Fed chair Yellen stated on Tuesday, that the Fed’s determination to raise rates and unwind its $4.5 trillion balance sheet, would not be derailed by inflation failing to breach the 2% target. EUR/USD fell by circa 0.3% to 1.1758, at one stage falling through S1 to 1.1717, to then end the day recovering to above the daily pivot point. GBP/USD fell to S1, by approx 0.5% to 1.3400. USD/JPY rose through R2 early in the New York session to a daily high of 113.25, before giving up some gains, to recede to R1 and 112.76. USD/CHF followed a similar pattern, ending the day at approx. 0.9719. USD/CAD rose by circa 0.9% and breached up through R3 as Canada’s central bank governor gave a speech indicating that no further monetary tightening would be imminent.

Economic calendar data impacted USD published on Wednesday 27th

• Pending home sales in the USA missed target and fell by -2.6% in August and by -3.1% YoY.
• Durable goods orders rose by 1.7%, beating the forecast of a 1% rise.

EURO

As the euro fell to a one month low versus the U.S. dollar, the single bloc currency failed to make significant gains versus its peers with the exception of the Canadian dollar. However, the loss versus the U.S. dollar owed more to dollar strength, as opposed to any continual bearish tendencies still lingering due to the German election result. EUR/GPB fell marginally by circa 0.1% to 0.8770, ending the day resting close to the daily pivot point. EUR/JPY rose by circa 0.2% to 132.59 and EUR/CHF fell by circa 0.2%, to 1.1420.

There were no significant economic calendar events relating to the Eurozone on Wednesday.

STERLING

At one stage during the day’s trading sessions the UK’s pound rose to a ten week high versus the euro, however, the momentum couldn’t be maintained. Other than its modest rise versus the euro and fall versus the U.S. dollar, the movements in sterling were contained in a tight range, as it failed to make significant gains versus its peers, with the exception of the Canadian dollar. GBP/CHF fell by circa 0.2% to 1.3021.

There were no significant economic calendar events relating to the U.K. on Wednesday.

EQUITY AND COMMODITY DATA

• DJIA up 0.29%
• SPX up 0.56%
• FTSE 100 up 0.38%
• DAX up 0.41%
• CAC up 0.25%
• STOXX 50 up 0.53%
• Gold down 0.7% @ 1283.03
• WTI oil up 0.2% @ 52.16

Significant economic calendar events listed for Thursday September 28th

• EUR German GfK Consumer Confidence Survey (OCT). Forecast to rise to 11, from 10.9.

• EUR German Consumer Price Index (YoY) (SEP P). Forecast to remain at 1.8%.

• USD Gross Domestic Product (annualised) (2Q T). Forecast to remain at 3%.

• USD Advance Good

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